BOSTON – Advisors should embrace opportunities in domestic and global stocks, but not expect much from fixed income over the coming year, according to top equity managers.
“There is no asset bubble [for stocks],” said Howard Ward, chief investment officer for GAMCO Investors, speaking at the annual Schwab Impact conference.
Price/earnings ratios are below historical averages, Ward said, adding that he expected that relatively slow domestic growth would extend the long-running U.S. bull market.
Stocks are cheap versus bonds and under-owned, Ward said. What’s more, the Federal Reserve Board’s easy monetary policy and stimulus strategies suggest “better growth ahead,” he predicted.
“Estimated stock returns will dwarf fixed income,” Ward said. “There’s no money to be made in fixed income for a very long time.”
Ward was also optimistic about the prospects for global equities.
“The world is not a bad place,” he said, predicting that 2016 would be a “good year” for the global economy.
The fortunes of the emerging markets have followed China, he noted. Despite China’s recent economic slowdown, the Asian giant is still “doing OK” and going through a “cyclical bounce,” according to Ward.
China does need a “more sustainable growth model,” Ward acknowledged. But the country’s economic stimulus policies, currency devaluation, capital controls and increased social safety net were likely to speed economic recovery, he added.
Cyber-security, water resources and disruption – big changes in business models – were cited as both challenges and investing opportunities.
The growing threat of cyber-breaches will affect “all of us” and put “everything at risk,” Ward said. But companies who specialize in cyber-protection also offer potential high – albeit risky – investment opportunities. “This is an area you need to be focused on,” Ward told advisors.
Information provided by Gabelli Funds and visualcapitalist.com.
Increasingly scarce water availability and companies doing work in that sector should also be on advisors’ radar, said Christopher Marangi, GAMCO’s co-CIO.
Disruption of existing industries and business models similar to what has already happened in media, travel and food should also be watched closely, Marangi said.
Value investors need to ask if the businesses they own are disruptable, he told advisors.
As for investing in a “disruptable world,” Marangi said investors must distinguish between Internet and “Internet-enabled” businesses and ask if “connectivity really makes a difference.”
“Be paranoid regarding threats and be creative regarding opportunities,” he told advisors. “And look for managers who think this way.”
Information provided by Gabelli Funds
Additional reporting by Chelsea Emery
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